It’s a fact of conveyancing life that not all transactions have a happy ending. Sometimes people change their minds. Sometimes surveys come back with horrifying results. Sometimes someone comes along with a bigger pot of money and pinches a property from right under your nose.
In England and Wales, the sorry truth is that nothing is guaranteed about a property transaction until the exchange of contracts. Of course, there’s an awful lot of work to be done before you reach this stage, and a whole team of professionals that need to be paid for that work whether or not you get the result you wanted.
All this means that when property sales and purchases do occasionally fall through, the buyers and sellers involved have to pay for things like conveyancing, mortgage set up fees and surveys regardless. Essentially, you could be down a thousand pounds or more with no sale/purchase to show for it.
Is there anything you can do about this?
Well, yes and no. There is such a thing as residential abortive transaction insurance (or RATI, as its friends call it). This type of insurance is also sometimes known as home buyers protection insurance… or other variations on the theme.
RATI insurance can be taken out at the beginning of a transaction and typically offers around £1500 worth of cover towards conveyancing-associated costs in the event of a transaction going kaput. Policy costs vary, but typically start from around £50.
What’s the downside?
Truth be told, we don’t generally recommend RATI to our clients. We don’t doubt that it can be helpful in some circumstances, but in our opinion those circumstances are quite – ahem – slim.
As with all types of insurance, RATI has very firm boundaries on what it will and won’t protect against. It’s not simply a matter of your purchase/sale falls through so the insurance reimburses you for your costs. Rather, you’d need to be sure that the way the transaction failed was an applicable failure.
For example, your insurance would likely pay out if you were made redundant and therefore had to pull out of a purchase… but not if you’d been heavily encouraged to take voluntary redundancy or if you’d heard rumblings of the possible redundancy before you took out the policy.
Equally, your insurance would likely pay out if your seller was injured in a freak bungee jumping accident and decided not to sell as a result… but not if one of their parents was unexpectedly diagnosed with something nasty and they no longer felt able to move away from them.
So… should you get it?
Far be it from us to tell people what to do (alright, alright we do sometimes do that) but we’d advise you to read any small print carefully before committing to a policy of this sort. After all, we suspect that RATI is often used more as a gimmicky sales tool than an actual safety net and it’s important to know exactly what you’re paying for.
As always, we’re on hand to offer advice on surviving the conveyancing process. Get in touch if you’d like to talk about conveyancing costs, failing transactions or RATI insurance (though please, please don’t ask us to go bungee jumping).